What Will Retirement Look Like for Younger Generations?

Earlier this week, I read the thought-provoking post at Get Rich Slowly, What Is Retirement? J.D. wrote about a recent camping experience with a few buddies and shared some of their conversation on the subject of retirement. One of the friends pointed out that he already thought of J.D. as “retired,” since he left his corporate job a couple years ago and now worked on his blog full-time. While J.D. does enjoy some schedule freedom, he still “works” at his writing craft. It does make you rethink the definition of “retirement” though, doesn’t it?

a flying lesson by my camera and me on Flickr

Shifting Views on Retirement

When I was a kid, my personal view of retirement was skewed significantly by the fact my grandfather retired from the Marines at 47, my grandmother was mostly a homemaker (particularly in her later years), and my mom was a single mom working 50+ hours a week in corporate America with no retirement in sight.

As I got older, I had friends whose parents were teachers, nurses and factory workers who had dedicated most of their adult lives to a single employer and retired from their chosen occupation. It wasn’t long before I recognized that was becoming the exception.

As our economy shifts away from manufacturing (something I personally find very sad), and into service, I think people will be more likely to change jobs dozens of times in their lifetime. I’m a bit of an exception to the rule myself. I’m in my 30s, but have worked for only two employers in my adult life (with a bunch of part-time gigs at different companies before that).

How Does this Relate to Personal Finances?

With all this job-hopping, the emphasis on personal responsibility for your financial future cannot be emphasized enough. Add in the question of social security’s solvency, the disappearance of the corporate pension, and the possibility of state bankruptcies, and you can easily see we are walking a financial tightrope with no safety net.

Younger generations must be more engaged with their finances than the “set it and forget it” generations before them. It used to be acceptable to plow all your money into 401k mutual funds and company stock. Ever heard of Madoff, Enron, or those target-date retirement funds with overly-aggressive allocations for soon-to-be retirees?

Forty year-olds with five previous employers may be sitting on five different 401k plans with bad administrators cutting into their profits with costly administrative fees. Rolling all those 401ks into an IRA might make sense, but the process can be overwhelming. And there’s always the temptation to cash out when you leave an employer – something that looks appealing, but can easily cost you nearly 40% in taxes and early withdrawal penalties. Ouch!

I’m not against 401k plans, particularly those that offer a matching contribution from employers, but if I had to choose, I’d much rather invest in a Roth IRA. Roth IRAs offer more freedom in terms of investment elections, and they offer the advantage of tax-free growth on earnings (you can even withdraw your Roth IRA contributions any time, penalty-free, in a pinch). And because Roth IRAs may be opened and maintained independent of your employment status with a particular employer, they make a lot of sense for younger generations of workers likely to bounce around the employment world before needing retirement funds.

Do I Even Want to Retire?

Back to the post from J.D; is he really retired if he still works several hours a day? I don’t think so. Has J.D. chartered a course of more personal freedom, rather than being chained to a desk eight hours a day, five days a week? Absolutely.

Perhaps we should change our definition of retirement. Or, maybe we should just expand our definition of self-employed. Were it not for a need to earn additional income, I’d say a full-time writer is mostly financially independent. That is, they no longer need to work for money to cover basic life expenses.

I believe most of us will enter a stage of semi-retirement when we get a little older. We’ll live off a combination of savings and part-time earnings, and be able to afford it by getting out of credit card debt and paying off the mortgage well before exiting full-time employment. Couple that with a frugal existence, and it wouldn’t take all that much to enjoy a lifestyle of more personal freedom.

Imagine getting to travel when most people are working. Imagine spending more time with your kids and grandkids – perhaps even homeschooling them if that is something that interests you. Imagine taking up a new hobby during the day, or volunteering more of your time. It’s all achievable, but not without some sacrifice up front.

I remind my kids, and any other young person I meet, to avoid making the big financial mistakes early on. If you do, you’ll have limitless opportunities to enjoy the next few decades of your life, while your peers will be paying for their mistakes.


  1. Great article- as a person who worked for nine different school districts-you hit the nail on the head. Unfortunately for me, ROTH IRA was not in my vocabulary until two years ago. Just didn’t “get it”.
    My grandfather ran a major non profit after he retired.
    My dad retired to writing and teaching poetry
    My husband is wood working and caring for our acres
    I haven’t figured it out yet, but not having to pack up and head to the classroom on Monday is a very freeing feeling.
    Right now I am simply decompressing and being a housewife (something you never retire from).

  2. The mistake is in thinking of “retirement” as something good. To “retire” is to withdraw from life. One has no choice when one gets too infirm to function effectively. But its not something to look forward to.

    The thing to look forward to is financial freedom. That’s good at any age.

    The mix-up came because, at an earlier stage of history, we were a poorer people. Financial freedom seemed beyond us. When we tried to think of the ultimate financial dream, we thought of being able to have enough money to withdraw from life when our time came without being dependent on others.

    Now, we are a richer people and can afford hundreds of varieties of financial freedom. So we should start focusing in on them and move away from the idea that the purpose of saving is only to withdraw from life. Humans tend to get stuck in old thinking patterns and it takes some time for us to see the folly of “the way it has always been.


  3. My husband is a ‘job hopper’, and it has worked out great for him. He works in consulting, and none of his employers offered a pension program of any kind, so retirement savings have always been a priority for us.

    Roth IRAs are not for everyone, namely those that exceed the income limitations and cannot even open one. If possible, it would be great to max out both the 401K and the Roth. I do like the flexibility a Roth offers.

    I think some people strive so hard to retire early, that they miss the fun of life along the way. Not to mention that you better have a heck of a lot of money saved up if you retire young. Sitting around the house watching every penny does not sound very fun.

  4. The interesting thing for me and my family is that I’m about 5 years from retiring. Granted, I’m in the US Navy, so retirement won’t cover all of my expenses (unless I move to the Philippines or Thailand), so another career is vital. However, I have come to view my retirement as enough of a “windfall” to allow me to focus on a job that I want to do vice what I have to do. I may be a teacher for awhile, or maybe a preacher, and then maybe a contractor with a defense company. The important thing is that I view retirement as a change in jobs, not a withdrawal altogether. Granted, that cuts down on the opportunities to go to the Bahamas, but what it does mean is that I’m going to stay active and healthy (at least mentally) for years after the Navy puts me to pasture.

  5. I always figured that retirement would include part-time work that I enjoy, with more time for loved ones, hobbies, and travel. I’ve seen too many people reach retirement age, stop working, and then getting bored and picking up a part time gig just to fill time. I like being busy, I like the work I do, and I don’t forsee either of those facts changing any time soon!

  6. I don’t think retirement is simply hitting an age or a number of years worked. You need to have a plan, after working 40+ hours a week for the majority of your life. What will you do with all these free time? Interest, hobbies are key. I think consulting opportunities might be a nice fit after a career.

  7. For me, the concept of retirement is simple: You have enough money saved up to live off of it (and the interest it earns) for the rest of your life. Of course, I said that the “concept” of retirement is simple. It is impossible to tell how long you will live and how much much you will need. You can certainly estimate both values, though.

    I always see myself working, at least part-time, even when I’m retired. But the key is: I have enough income from savings that I don’t *NEED* to work. I will just do it to keep active.

    Just because J.D. is financially independent, works for himself, and creates his own hours, (I’d assume) he’s still working to make an income. He’s not retired yet because he cannot strictly live off of retirement savings.

  8. My plan is to save a lot of money early and often before I have too many commitments. I’d like to live a relatively easy life throughout, so I think that saving 50% of my income now will help me later on. I’ve heard of far too many people who didn’t start retirement investing until their 30s or 40s. By contributing $10,000 over the past year (I’m 23), I think I’m setting myself up for a full retirement.

  9. I regularly think about the line in John Grisham’s “The Firm”, where the main character plans his life after college by stating he’ll become a lawyer, work 100 hour a week for twenty years and get to retire in his forties. That struck me as odd, because it indicated that he disliked being a lawyer and was putting up with it in order to retire. Why not just do what you love until you die? Then, you’ll never really have worked at all.

  10. I work for a government agency. After 30 years, we are suppose to get a pension that covers up to 50% of our retirement. My co-workers rather lose more benefits than give up a percentage of the pension. I rather they give me a 401k with a match. It is not as if I do not put in $400 a month myself to get this “pension” (employees have to contribute a portion to their pension). Since they still call it a pension, I am not sure if I can get the money I contributed. Whereas, if I invest $400 a month to a matching 401k, I might sit pretty nice at retirement without the worry that my bankrupted state might decide to do some creative bookkeeping that mess up my pension.

  11. You nailed exactly what I would like to do!

    I want to be semi-retired when I’m a bit older! To totally stop working (or thinking) weakens the old brain (use it or lose it), so full time retirement is not the way to go!

    With traveling though, the only trouble with waiting to do that is you miss a lot of great places while you are young! As you get older, you many not have as much fun at certain places that are know to more focused more towards a younger crowd…

  12. I think that last section is key for my, younger, generation. I don’t think many of my friends want to retire and play golf and go to spas all the time. More of them want to work, make a good living, then “retire” and follow their passion: start their own business, volunteer with nonprofits, etc. But having the freedom to be able to do that, on their terms, is key. Planning and saving for that kind of lifestyle now is what drives us.

  13. If you’re over 50, can’t find work…and are, at best, underemployed, and making 1/6th of what you made in your profession…is that “retired”?

    If you’re over 60 and nobody wants you, for anything, and you can’t find any work at all (yes, you’ve tried to create your own business, but it is not enough income), are you “retired”?

    If you’re 30-something and you can’t get work, are you “retired”?

    If you’re a college grad who can’t even get a gig as a volunteer, are you “retired”?

  14. We’re aiming for financial independence – the ability to do whatever we want even if that is having a job. So even though I always say that we are planning to retire at 52…I mean we are planning to have enough money that we can retire if we want to at 52…

  15. I think the regular notion of retirement is completely outdated. Things have changed so much. Nothing is certain. Enron, Madoff, the end of the “for life” job and social security mayhem are all great points here. We cannot sit back and just expect things to work out alright. We have seen that being safe and cautious isn’t really safe and cautious. There is this relatively new concept of the mini retirement that I really believe in and embody. That retirement isn’t solely for the rich or those who have worked their entire lives. Why not save and take mini retirements throughout your life so you can enjoy the fruits of your labor when you are younger and more able bodies as opposed to saving all the fun and relaxation for a distant and uncertain future? Life is awesome. You only live once. Live it now. The retirement game has changed.

  16. I’m 29 and my definition of retirement is likely similar to FD’s friends. I plan to retire somewhere between 45 and 55, and my idea of retirement is pretty simple. I don’t need to work, and I don’t work at a job (unless I want to) that has set hours. That being said, I will still “work” – but only on my own terms. My financial planning at this point in my life, general frugal nature, plus some luck in who my family is, will allow this. My idea of retirement is far different than my grandparents – who retired to…doing nothing but being around the house or traveling.

  17. My worst memory as a kid was seeing my grandmother (who lived with us) deteriorate quickly after retiring. Not that she didn’t deserve to retire, but she had no other interests to keep her going at the same level that work did. So “retiring” in itself is not always good. Having the freedom to retire and do other things is probably even more important.

  18. Maybe it’s just because I’m in my 20’s but I plan to work until the day I die. Maybe not always in the same field, but the idea of waking up in the morning with nothing waiting for me sounds dreadfully depressing. I’m afraid it would just seem like waiting to die.

  19. Alex writes:
    “but the idea of waking up in the morning with nothing waiting for me sounds dreadfully depressing. I’m afraid it would just seem like waiting to die.”

    I guess we have a different idea of “retiring.” To us, “retiring” means we can then spend time and energy on our many interests, which include working for charities and nonprofits; spending time with people (family and friends) we had no time for while working 60 to 80 hours a week for decades. We have dozens of places we want to travel to around the world; dozens of personal projects we want time for.

    We are NOT waiting to die. If we were folks whose primary work (source of income) matched our interests and passions, we’d probably work until we died too. Most of us don’t have that luxury. Maybe you will.

    you’re in your 20s. Wait till you’ve worked hard (and I mean hard and long and under grueling deadlines for crazy clients and worse bosses) for twenty more years or so. You may want to rethink how you’ll feel about retiring.

    Also, a lot of this has to do with one’s physical health. A lot of people’s health is literally jeopardized by their work and/or the amount of time they are forced to work over the years. some people simply can’t do at even 45 what they could physically do at 25.

    Life changes. What you think now? You have no idea how you’ll feel much later down the road.

    But for those who think leaving full-time work means retiring, you need to consider each individual. Most people today have a long list of things they would like to do IF they could afford to retire. Today, it’s the rare person who can retire. Most of us, if we’re lucky, WILL work till we drop.

    That includes lots of people who saved, still lost money in the market, and/or their jobs. Better luck in YOUR next five or six decades, Alex. You’ll need it the way things are going economically in this country.

  20. I think it’s so sad that anyone would think that retirement means “withdrawing from life.” I’ve never heard anything so silly in my whole life. Retirement means you’ve earned the money to determine exactly how you want to spend your time. For me, in so many ways this was the beginning of my life. I finally had the time to enjoy the activities that are really important to me, spending more time with friends and family, spending more time gardening, writing, and learning, spending more time just enjoying life. My job was enjoyable and a great way to make money, but it was not my life–so withdrawing from it was in no way withdrawing from my life. I dove into the deep end of life with my retirement, I’m not just treading water anymore.

    Having said that, I’m 2 1/2 years into retirement and a great little consulting gig has fallen into my lap. I can do anything I want, take it or leave it in retirement, so I’m going to do it. And as long as it’s fun, I’ll keep it, and when it stops being fun, I’ll stop doing it. THAT’S what retirement is all about. The freedom to chose exactly how you want to spend your time without the pressure of HAVING to do something to pay the bills.

  21. I agree that working while retired is a must. One must keep himself busy and have atleast some sort of steady income. Also if one can take one or two week long vacations every year throughout their working life then by retirement you would have seen most of the world and be able to focus more on hobbies when retired.

  22. My definition of retired is simple. When you no longer go to work for an employer that requires you to pay Social Security, and Medicare out of your paycheck. If you are a blogger, and receive your income, you are required to pay those (along with the other 6.5% your “employer” pays as you are self employed). When you are no longer going to work, but still draw a pension (and thus pay those taxes), you are still retired as you don’t go to work. If you are living off investment income, but you have to work at it (ie. look at the stock market, etc.) you are still working.

  23. My perspective of retirement took on a much different meaning when my brother Rich, 6 years my senior, retired from the Air Force just a few years ago.

    Rich had no interest in sitting around the house all day or fishing his time away. He’s still a young guy! No, for him (and for me), retirement came to mean (as others have said here) that he’s free to pursue whatever career choice he’d like. He has the freedom to choose a field of work and employer as fits HIS liking and should he decide to try something different, that’s his prerogative.

    He still works full-time, but he’s doing something that he genuinely enjoys and is stimulating. He does (personally) travel a fair bit more than before retirement and I suspect that’s something he plans to do even more of.

    I’m a bit of an anachronism – I’m 46 and have worked for only 2 employers in the past 22+ years. I’m not too many years from the point where I could retire from my current job and the benefits (especially family healthcare) are excellent, so I’m planning to stay put at this job for awhile longer. But even after that, I’d go crazy if I didn’t have some kind of job to go to, but I sure like the idea of getting to cherry-pick that job.

    I’m also very much of a late-comer to parenthood and that’s begun to reshape my thoughts on retirement. I spend plenty of time with my wife & son now, but I really like the idea of being more available when he’s in the upper grades in school. I suspect he’ll be very involved in sports, so I look forward to having the freedom to be at those games.

  24. I will most likely work my entire life. My idea of retirement is to have a few sites online making a nice steady flow of income. Just enough that I can get by and travel as wanted 🙂

  25. As a person who worked his tail-off, saved and invested his money, didn’t have children, and owns two houses in California, the only response I have to the delusion on this sight:

    This time it’s different. Don’t expect the economy to recover enough for your retirement.You won’t have as easy as your parent’s generation. Therefore, learn a skill that someone will pay you for doing. Because I’m going to try and do my best at not paying taxes.Get rid of your debt– it will strangle you..

    I planned well by purchasing rural property with enough timber and water to survive indefinitely, almost completely off the power grid.

    I would recommend trying to not rely on other people for support, including the government, for your future job.

  26. As a stay-at-home mom, it’s hard for me to even define what “retired” will mean for me. I hope to get an outside-the-home job once my kids are school-age, but if that doesn’t work out, does that mean I’m retired? Or do I “retire” once the kids are out of the house? I imagine that 20 years from now, my husband will still be working a traditional job (maybe I will, too), but at the same time, I’d hope for more flexibility to travel and spend time together.

  27. Our goal is to live frugally now and save for our future. Unlike most, we will give ourselves a choice of what “retirement” means to us.

  28. The elephant in the room is medical expenses. How much will it take to pay for insurance, copays and deductibles and long-term care insurance if appropriate? That’s what keeps lots of us from retiring and from financial independence.